Dish-Sprint Talks Said to Falter in Part Over Breakup Fee

Sprint Nextel Corp. announced yesterday that Dish Network Corp. hadn’t produced an “actionable” bid and moved instead to endorse a sweetened, $21.6 billion offer from SoftBank Corp., which originally agreed to acquire the carrier in October. Photographer: Daniel Acker/Bloomberg

June 12 (Bloomberg) -- Dish Network Corp.’s merger talks
with Sprint Nextel Corp. collapsed after a series of
disagreements, including Sprint demanding a $3 billion reverse-breakup fee, people familiar with the matter said, leaving the
satellite-TV company with just a week to regroup and try again.

Dish had countered with a $1 billion reverse-breakup fee,
which would be paid if the takeover didn’t win regulatory
approval, said one of the people, who asked not to be identified
because the discussions were private. Sprint announced this week
that Dish failed to produce an “actionable” bid, leading the
carrier to endorse a sweetened $21.6 billion offer from SoftBank
Corp., which originally agreed to acquire Sprint in October.

Dish, the satellite-TV provider controlled by billionaire
Charlie Ergen, now faces a June 18 deadline to submit what
Sprint has described as a “best and final” fully financed
counteroffer. Dish said this week that it continues to view
Sprint as holding “tremendous value” and is considering its
strategic options.

Dish’s failure to show committed financing and to make a
definitive merger proposal concerned Sprint, according to a
person familiar with the negotiations. Dish, on the other hand,
was frustrated by what it perceived as Sprint’s slowness to
deliver documents necessary to conduct due diligence and
complete an offer, other people said.

Poison Pill

As part of the new agreement with SoftBank, Sprint plans to
adopt a shareholder-rights plan -- also known as a poison pill
-- that will make it more difficult for Dish or other suitors to
make unsolicited bids in the future.

Sprint asked for a high reverse-breakup fee out of concern
the deal would drag on for many more months before getting
approved, one person said. Sprint and SoftBank expect to be able
to complete their transaction by early July. SoftBank has agreed
to pay a reverse breakup fee of $600 million if the deal falls
apart, according to filings.

The much-higher fee for Dish shows favoritism on Sprint’s
part, said Erik Gordon, a business and law professor at the
University of Michigan in Ann Arbor.

Likes, Dislikes

“The Sprint board wants a reverse-breakup fee from Dish
that is five times what it got from SoftBank,” he said. “That
tells you something about whom the Sprint board likes and
doesn’t like.”

Sprint also told Dish it anticipated it would take a year
for a Dish merger to close, two of the people said. Dish
estimated it would be closer to four months, they said.

Dish and its advisers met for several hours on June 7 with
Sprint’s board and its Bank of America Corp. advisers in order
to produce a final offer, one of the people said.

Dish was waiting on more documents from Sprint and was told
it had several more days to put in its bid, the person said. The
company didn’t know the Softbank bid was coming, according to
the person.

Sprint is the third-largest U.S. wireless carrier, behind
Verizon Wireless and AT&T Inc. SoftBank, based in Tokyo, plans
to use Sprint to expand into North America. Ergen, meanwhile,
wants to add Sprint’s wireless services to his company’s
satellite-TV offerings.

Institutional Shareholder Services Inc., the biggest
shareholder-advisory firm, recommended SoftBank’s earlier bid in
a report this month, saying the deal would supply Sprint with
the cash it needs to upgrade its network and compete with larger
carriers.

ISS, based in Rockville, Maryland, reiterated its
endorsement of SoftBank’s offer in a follow-up report.

“Sprint noted that its special committee has ended
discussions with Dish,” the firm said. “As terms have
improved, and no firm competing bids are currently available to
shareholders, ISS continues to recommend shareholders vote for
the transaction.”